The latest Close Brothers’ Business Sentiment Index (BSI) reveals a mixed outlook for small and medium enterprises (SMEs) in the UK. For the first time since May 2023, the overall BSI score has fallen, indicating a dip in business confidence among the nation’s small business owners. This decline follows four consecutive periods of improvement and comes despite half of businesses expecting to benefit from recent Budget changes.
However, the picture is not entirely bleak. The manufacturing & engineering and services sectors have shown significant improvement. Manufacturing & engineering reached its highest level since February 2022, while the services sector climbed to its highest recorded score.
Sentiment in transport & haulage, print & packaging, construction and agriculture all declined following challenges in these sectors, with reasons for the falls ranging from seasonal dips in
Impact of the Budget
Business owners appear divided on the impact of the recent Budget. While some welcomed the capping of Corporation Tax and the smaller than expected rise in Capital Gains Tax, others were concerned about the increase in the national living and minimum wage, and employer National Insurance. This split sentiment mirrors findings from the British Chambers of Commerce, which reported fewer firms expect their turnover to increase and many are likely to raise prices.
Appetite for investment
Despite the mixed economic news, the appetite for investment among UK SMEs has seen a notable rise. The percentage of firms planning to invest in their business in the coming 12 months improved by 6% to 72%, reflecting stability across all sectors.
Missed opportunities
On a less positive note, the number of companies missing business opportunities due to a lack of available funding rose to its highest level in over 18 months. This issue has been identified by the Federation of Small Businesses (FSB) as a significant barrier to economic growth.
- January 2025: 45%
- May 2024: 34%
- January 2024: 39%
- September 2023: 41%
- May 2023: 45%
- December 2022: 51%
Economic outlook
Overall, small business owners remain marginally more positive than negative about the UK’s economic prospects for the coming year, though this optimism is still below the levels seen in November 2021. Notably, the print & packaging and agriculture sectors have the most concerns, while manufacturing & engineering and services are more optimistic.
Predicted business performance
Reflecting the overall BSI result, predictions about future business performance remain relatively static. A majority of firms (52%) expect their prospects to remain unchanged in 2025. However, more business owners (40%) are hopeful for expansion, compared to just 7% who anticipate contraction.
“Typically, sentiment in the sectors rise and fall together, but this time there’s a real and noticeable disparity, with some trending up and others the opposite way,” said Matt Roper, CEO of Close Brothers’ Commercial business.
“Print & Packaging, Construction and Agriculture all dipped fairly significantly in the second half of 2024, but this was not unexpected given the challenges these industries have faced over recent months.
“Yet, that being said, there are some positives; for example, 72% of the firms surveyed will actively seek funding for business investment in 2025, and with our history of lending through the cycle, we remain well positioned to support our customers – old and new.”
